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Free Content Lessons from the Kibbutz on the Equality–Incentives Trade-off

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Abstract:

The first kibbutzwas established southwest of the Sea of Galilee in 1910, but the vast majority of kibbutzim were established in the 1930s and 1940s, shortly before the creation of the state of Israel in 1948. Founders aimed to create a “new human being” who cared about the group more than about himself, a homo sociologicus who would challenge the selfish homo economicus. This idealistic view can explain many of the key features of kibbutzim: equal sharing in the distribution of income; no private property; a noncash economy; communal dining halls where members ate their meals together; high provision of local public goods for use by kibbutz members; separate communal residences for children outside their parents homes, which were supposed to free women from their traditional role in society and allow them to be treated equally with men; collective education to instill socialist and Zionist values; communal production, whereby kibbutz members worked inside their kibbutzim in agriculture or in one of the kibbutz plants; and no use of hired labor from outside kibbutzim—because hiring labor was considered “exploitation” under the reigning socialist ideology. To an economist, steeped in thinking about incentives that self-interested individuals face, there are three reasons why an equal-sharing arrangement of this sort seems unlikely to last. First, high-ability members have an incentive to exit equal sharing arrangements to earn a wage premium—so-called “brain drain.” Second, low-ability individuals have an incentive to enter equal-sharing arrangements so that they can be subsidized by more-able individuals—so-called adverse selection. Third, in context of equal sharing, shirking and free-riding are likely to be prevalent. However, kibbutzim have survived successfully for the past century and currently consist of 120,000 members living in 268 kibbutzim. In a number of ways, the kibbutzim offer an exceptional environment to examine the potential trade-off between equality and incentives.

Document Type: Research Article

DOI: http://dx.doi.org/10.1257/089533011798837783

Publication date: December 1, 2011

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  • The Journal of Economic Perspectives (JEP) attempts to fill a gap between the general interest press and most other academic economics journals. The journal aims to publish articles that will serve several goals: to synthesize and integrate lessons learned from active lines of economic research; to provide economic analysis of public policy issues; to encourage cross-fertilization of ideas among the fields of thinking; to offer readers an accessible source for state-of-the-art economic thinking; to suggest directions for future research; to provide insights and readings for classroom use; and to address issues relating to the economics profession.
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